Like everyone in NZ, I've got the option of joining Kiwisaver this year. I guess it's a sign of age that I'm actually interested in it.
I've just had a look at the terms - which, on most of the information sites, have been subject to a degree of inaccurate precis.
They basically amount to:
- An initial $1,000 kickstart
- A tax credit of $1,043 or the amount you contributed in a year, whichever is lower
- An employer contribution of 1% in 2008/09 rising to 4% in 2011/12
In return for this, you lock your money up until age 65.
What isn't in the scheme (and *is* in a UK personal pension, for instance):
- tax relief on contributions (apart from the capped tax credit). Your contributions come out of *taxed* pay
- tax relief on fund growth. The fund providers are taxed at 30% (you don't see this tax bill - it just reduces your fund growth)
Of course, the Brits pay quite a lot more tax than we do and they can only take 25% of their fund out as a lump sum.
I've made this calculator to see what the tangible benefits of the scheme are. It compares, based on age and salary, the effect of putting 4%/8% of salary into Kiwisaver against putting the money into a fund directly (and thus having it immediately accessible). Note that due to GoogleDoc limitations, to change values you'll have to export it into Excel or your own document if you want to change any values.
For the first 4% of salary, you always win. The size of the win tapers off as you earn more (and the younger you are) but you always get a reasonable (8% rather than 4%) benefit from locking your money up in Kiwisaver.
For the next 4% (i.e. making an 8% contribution) you *never* win in cash terms, unless you earn less than $27k. Locking up an extra 4% of income gives those earning more than this zero benefit.
(Of course, you might regard having the money locked away and unavailable to spend as a benefit - then again, if you wind up short of cash and needing to borrow at any stage, it's a big negative).
So I'm going to do 4%, but I can see no reason at all to go beyond this.
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4 comments:
Actually replying to a comment you made on frogblog.
You were assuming ACT doesn't support keeping Party Pills legal because rich people don't happen to take them.
Of course if you actually bothered to do you're homework you would realise that not only are ACT socially liberal by policy, the party's actions support those policys.
Heather Roy received the recent party pill petition opposing the proposed ban on party pills.
So explain the linked article on the ACT website with ACT demanding (in 2002) a ban on party pills? Or have they made a policy change - which I've not seen on their site?
Not that I can actually access the site today - database error. Shouldn't ACT support capitalism and use Microsoft or Oracle software - not that commy open source stuff? :-)
The ACT site's back - a search for BZP features:
http://www.act.org.nz/node/23153
and
http://www.act.org.nz/node/23191
both demanding that BZP is banned.
also note that your money goes into a fund so watch out for fees, stupid investments, and so forth.
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